Housing is stuck because affordability is in the gutter. The NAR is yapping Nonsense.
Pending Home Sales
Pending home sales represent sign contracts of existing home sales that have not yet closed.
New home sales are reported at contract signing but existing home sales are reported at closing.
Thus, pending home sales are a leading indicator of existing home sales. The lead chart is from Mortgage News Daily. I added the dashed lines.
The National Association of Realtors (NAR) reports Pending Home Sales Decline 2.3 Percent in July.
Pending home sales in July fell to the lowest level since January 2026. Month-over-month pending home sales declined in all four major U.S. regions. Year-over-year pending home sales increased in the Midwest but declined in the Northeast, South and West.
“The highest mortgage rates of the year hit right in the middle of summer, and that’s pulling back contract signings,” said NAR Chief Economist Dr. Lawrence Yun. “Home prices are at record highs so houses for sale are sitting on the market longer, and fewer buyers are bidding above the asking price than a year ago, though there are large local market variations.”
“Job gains should bring more buyers into the market, especially if mortgage rates stabilize or decline, though that impact takes time to show up,” Yun said. “Right now, pending contracts are 30% below their pre-pandemic 2019 level, while payroll employment is 5% above. That gap points to sizable pent-up demand that should be unleashed in the coming years as more supply reaches the market and affordability improves.”
That’s another superficial, yet expected, set of comments by the NAR’s spiritual cheerleader, Lawrence Yun.
Existing-Home Sales vs Mortgage Rates
The blue dotted like shows how closely existing home sales track pending sales.
The chart also shows nonsense by Yun regarding jobs and affordability.
Houses are so unaffordable that sales did not improve between September of 2023 and January 2026 despite mortgage rates falling from 7.62 percent to 6.05 percent.
Also note that sales did not further decline on the rise in mortgage rates from 6.05 percent to the July rate or 6.54 percent.
Price Insensitive Buyers
What the chart does show is a pool of price-insensitive buyers who just don’t give a damn about affordability because for them affordability is not an issue.
These are wealthy buyers with enough stock market gains, housing equity, other means of down payments, or all cash buyers.
Also included are economic gamblers who think stock market gains, housing gains, or declining future interest rates will bail them out.
Well, good luck to the gamblers with the average 30-year mortgage rate at 6.77 percent as I type.
Meanwhile, President Trump is making absurd comments about interest rates.
And Treasury Secretary Scott Bessent has resorted to desperate measures hoping to bring down the long-term rates.
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If you selling at least offer to provide cash for up to 4 discount points to lower the mortgage rate 1% such as currently from 6.8% to 5.8%. That is like lowering the price 10%, but it only costs you 4% of the mortgage.
And offer a 10% discount from the all time high market price of the home.
That should help to attract buyers, as its equivalent to lowering the price 20% from the all time high price.
If annual inflation remains at 3.5%, then based on historic spreads the 10 yr Treasury should remain around 5% and the 30 Yr mortgage around 6.75%.
If or until prices drop considerably, deals will continue to fall through, homes will become less and less affordable, and developers will eventually toss in the towel for many locations, they may once had been eyeing.
This all starts with the ones with money and leverage. They and only they can get things rolling again. Pain will be felt by the wealthy this time, and those that profit, will be the middle class proportional to buyers.
When you break down classes, the lower don’t have the money, even with substantial price drops. Prior and still existing debt gets in the way of anytime soon as well. The upper class have been spending, and buying, and developing to gain yet more wealth. Strike while the iron is hot, but they got greedy, and we are in and have been in a chilling phase.
This leaves the smartest of the groups with potential to profit from this downturn, and profit greatly if the wealthy overextended, and have credit problems themselves. Here, potentially imo, comes the “Middle Class” turn at things. We shall see soon enough…
It’s cheaper to rent. By a lot.
I’m sure sales on the courthouse steps are up.
It is stuck. Only little pieces can become unstuck and they don’t last long.
And you thought 2008 was bad! At least back then we didn’t have a guy trying to do check kiting on a national level. Wonder how this one settles out.
back to the national debt Vance says Bessent has ‘discreet’ plan to address $40 trillion national debtdiscreet?? hmm what could that be?
https://thehill.com/homenews/administration/6042908-vance-bessent-national-debt-plan/
People used to build basement houses. They would build the basement first, live down there, and maybe build the above ground portion of their house before they died of old age. In grade school I had friends who lived in basement houses. Maybe we’re about to learn why long ago I nicknamed him Scotty Basement,
The trick is getting to DOW 100k while just telling you there’s a secret plan the whole time.
Lawrence Yun….”There’s never been a better time to buy”
The standard go-to phrase of NAR’s shill.
I am trying to imagine some scenario where interest rates come down to recent norms in any reasonable number of years. Only a 2008-level scenario might do it? I wouldn’t be hoping for that.
I live in a well-heeled and high-demand locale, with ridiculous amounts of money asking for a way in. They flatten houses and build palaces (pretending to be low-key mega cottages). 2008 was barely a blip here. Housing prices have declined slightly from peaks of a few years ago. But I think there would be a relative impact, some deduction for high interest.
The first opportunity would be the 18 month interest rate cycle bottom due in September 2027. The next best would be the 54 month interest rate cycle bottom due in March 2029. By then a recession should also help to lower prices.